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Obamacare govt contracts’ price tags nearly double original forecast

Published time: March 12, 2014 00:09
 This December 2, 2013 photo shows a woman in Washington, DC reading a message indicating that the HealthCare.gov insurance marketplace internet site has too much traffic to continue enrollment. (AFP Phoro/Karen Bleier)

This December 2, 2013 photo shows a woman in Washington, DC reading a message indicating that the HealthCare.gov insurance marketplace internet site has too much traffic to continue enrollment. (AFP Phoro/Karen Bleier)

The Obama administration has approximately doubled the value of a contract with a cloud service provider to store data from the HealthCare.gov website, an indication that the controversial policy, while helping people, will cost more than first thought.

The Centers for Medicare and Medicaid Services (CMS), a federal agency that falls under the US Department of Health and Human Services, will pay up to $58 million to manage and secure information on the Obamacare website for at least seven months as the government prepares to shift that data to a subsidiary of Hewlett Packard Enterprise Services.

The deal was revealed in a contract dated March 6 and reported on by Joseph Marks of NextGov.com.

If this is the final extension Terremark, an IT subsidiary of Verizon technology services, will have been paid $120 million since 2011, when it first became a contractor for HealthCare.gov. The original deal was reportedly for $11 million. Since then, over the course of at least 12 updates, changes, and repairs, the fees swelled to approximately $60 million.

The government has explained the contract modifications by admitting that “at the time of the contract award, the scope of cloud computing needs to support the implementation of insurance exchanges was unknown,” adding that the “CMS believed if the additional services were not added urgently, the exchanges would not function as designed and citizens would continue to have issues using the marketplace.”

The government announced in November that it would switch providers from Terremark to Hewlett Packard after multiple site outages made it temporarily impossible for people to sign up for a new healthcare plan. Health and Human Services Secretary Kathleen Sebelius told a congressional committee that “It is the Verizon server that failed, not HealthCare.gov” during the flawed Obamacare rollout late last year.

Jeffrey Zients, an economic adviser to the president who was appointed as a consultant on the ongoing project, said the Terremark issues were a “frustrating roadblock.”

There have been reports, though, that administration officials were aware of technological issues at Terremark as far back as 2010. The switch from Terremark to HP, though, hit a snag because of a delay in moving the vast amount of data to a new host.

Frank Gillett, an analyst with Forrester Research, an independent technology and market research company based in New York City, told the Wall Street Journal’s Spencer Ante and Christopher Weaver that shifting such a massive enterprise includes developing a plan, hiring engineers, purchasing equipment, and a number of other ideas.

It is a major exercise to move something like that,” Gillett said in November, adding that “it is a minimum of weeks and more like months.”

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